Zuma tests consequences of Cabinet reshuffle with Gordhan recall

Zuma has laid down a clear red line between him and Pravin Gordhan, issuing a direct order for the cancellation of a (what seems to have been relatively last minute) roadshow to see investors and ratings agencies. Either Gordhan obeys and Zuma is viewed as stronger, or Gordhan disobeys and challenges Zuma to fire him.
If the roadshow continues then we will know what path is being taken.

This is a dramatic shift in risks clearly given the baseline had been originally that a reshuffle would not see Gordhan touched. The chances of Prexit are now clearly higher. However, Gordhan is used to playing such high stakes political poker games. It seems this week is going to be really decisive either way. It is also possible that Zuma wants Gordhan there if he only reshuffles the deputy. This is a test of the “Zuma weak vs Zuma weaker” split we’ve had with market opinion and is impossible to call given it ultimately comes down to Zuma’s risk aversion or not on the issue.

That risk aversion, however, may well be partly linked to the markets and ratings agencies. I believe today could be a test of the water to undertake a reshuffle. The presidency has seen such a strong rand and is wondering how much of a political shock it can take – they do watch these things closely. So far the market reaction has been very muted. Suggesting they could indeed go ahead with a reshuffle. The market should not forget they are part of the circle of cause and effect. In this sense the lack of risk premia here is inadequate but also a causal factor ... I don’t think this is considered enough by investors.

As we’ve said previously a reshuffle is ready to go and something Zuma wants to do. It could be deployed rapidly if Zuma does want to do it. Brian Molefe could be placed into the deputy (or maybe minister) finance position and Nkosazana Dlamini-Zuma into presidency as a minister for transformation or similar. She can go there without becoming an MP if Zuma removes one of the other current two non-MP ministers.